Trump just admitted he "loves inflation"

Quick thing worth knowing about inflation is that prices can rise two ways: a demand shock (people spend too fast) or a supply shock (the cost of producing things goes up).

They look the same at the checkout, but the cure for one makes the other worse.

The 1970s was a supply shock. Oil went from $2.50 to $40 a barrel and dragged the price of everything up with it, because energy is the input to all production.

Here is where it gets interesting 🫤

The Fed treats inflation as a demand problem, so it raises interest rates to cool people down. But if the real cause is supply, there is no excess demand to cool.

All a rate hike really does is push banks to lift mortgage and loan rates, so households and firms hand more of their income to the banks. You squeeze the economy without touching the actual cause.

Steve's latest video breaks the whole thing down, so it is a must watch!

Watch, then tell us supply shock or demand shock?

https://www.youtube.com/watch?v=HCDR3y4rqik&views

0 comments

Trump just admitted he "loves inflation"